ALLAMA IQBAL OPEN UNIVERSITY

(Department of Commerce)

Financial Reporting II (8568)

CHECKLIST

SEMESTER AUTUMN 2017

This packet comprises the following material:

1. Text Book (ONE)

2. Course Outline
3. Assignment No. 1,2
4. Assignment Forms ( 2 sets )

In this packet, if you find anything missing out of the above mentioned material,
please contact at the address given below:

Mailing Officer
Allama Iqbal Open University
H-8, Islamabad

Moaz
zam Ali
(Course Coordinator)
 ALLAMA IQBAL OPEN UNIVERSITY
(Department of Commerce)
***
Instructions

1. Plagiarism and or hiring of ghost writer/s for solving the assignment/s will
debar the student from award of degree/ certificate, if found at any stage.
2. Submitting assignment/s borrowed or stolen from other/s as one’s own,
will be penalized as define in “AIOU Plagiarism Policy”.
3. You are required to solve all questions if you are unable to understand any
question of assignment, do seek help from your concerned tutor. But keep
in mind that tutors are not supposed to solve the assignment questions for
you.

ASSIGNMENT NO. 1

Course: Financial Reporting II (8568) Semester:

Autumn 2017
Level: M. Com Pass Marks:
50

Question No. 1
Marks (10+10) 20
A. Keeping in view the IAS-17, classify the following transactions with reasons
into operating lease or finance lease:
i. A Ltd. has acquired an asset on lease the ownership of which will be
transferred to the company at the end of lease term.
ii. The Zee ltd. has acquired an asset on lease with an option to buy it at the
end of lease term at scrap value.
iii. The Z Ltd. has acquired an asset on lease for 8 years. The economic life of
the asset is 10 years. The company has no intention to purchase it at the
end of lease term.
iv. X Ltd. has acquired an asset with annual lease payment of Rs. 50,000 for
ten years whereas the fair value of the asset is Rs. 410,000.

B. Calculate the rate of interest implicit in the lease agreement in the following
example:
Fair value of the asset Rs. 700,000
Three annual installments Rs. 250,000 each
The lease rentals are paid at the end of each year.
 Question No. 2
Marks (10+10) 20

A. Keeping in view the IAS-38, calculate the amount of amortization charges for
each year:
The Zee Ltd. has incurred Rs. 12,00,000 on developing an intangible asset. The
expected useful life of the asset is 6 years with no residual value. The expected
pattern of benefits from intangible asset is below:
Year 1 2 3 4 5 6 Total
Benefit (Rs. in Millions) 7 14 22 12 10 17 82

B. Discuss by keeping in view the IAS-38, whether following costs will be

capitalized:
i. Expenses on research of new improved material of Rs. 12,000.
ii. Expenses on applied research amounting to Rs. 100,000.
iii. Donation to a research institution of Rs. 22,000.
iv. Expenses on construction of prototypes of Rs. 12,000.
v. Expenses on a project of Rs. 150,000 which is commercially and technically
viable.

Question No. 3
Marks (10+10) 20
A. Keeping in view the IAS-36, calculate the recoverable amount and
impairment loss in each case:
Items A B C
Carrying Value 100,000 150,000 120,000
Net Realizable 110,000 125,000 100,000
Value
Value in Use 120,000 130,000 90,000

B. A company has acquired a machine at a cost of Rs. 500,000 in 2007. The

company charges depreciation on straight line basis at 10%. The useful life of
machine is 10 years. At the end of 2007, the recoverable amount of the machine
was Rs. 4 million causing an impairment loss. After 5 years of use, due to the
technological change, the recoverable amount of the machine was 262,000
causing a reversal of impairment loss. You are required to show how these
transactions will be treated in the financial statements.

Question No. 4
Marks (10+10) 20
A. Keeping in view the IAS-37, discuss with reasons the accounting
treatment of following situations:
i. A damage claim of Rs. 1 million for breach of contract has been served to
the company. The company’s legal council is of the opinion that it is
probable the damages will be awarded to the plaintiff.
ii. A suit has been decided against the company for Rs. 2 million in the High
Court.
iii. The company has appealed to the court for the settlement of the sales tax
liability of Rs. 3 million.
iv. A supplier has returned an amount of Rs. 8 million previously recorded as
bad debt.
v.
B. A company requires a provision of Rs. 100,000 at the end of year 5. The
discount rate is 8%. Calculate the amount of provision for each year.

Question No. 5
Marks 20
Discuss in detail the disclosures requirements in the following International
Accounting Standards (IASs):
i. IAS-20
ii. IAS-12
iii. IAS-40
iv. IAS-24

GUIDELINES FOR ASSIGNMENT # 1

The student should look upon the assignments as a test of knowledge,
management skills, and communication skills. When you write an assignment
answer, you are indicating your knowledge to the teacher:

 Your level of understanding of the subject;

 How clearly you think;
 How well you can reflect on your knowledge & experience;
 How well you can use your knowledge in solving problems, explaining
situations, and describing organizations and management;
 How professional you are, and how much care and attention you give to
what you do.
To answer a question effectively, address the question directly, bring important
related issues into the discussion, refer to sources, and indicate how principles
from the course materials apply. The student must also be able to identify
important problems and implications arising from the answer.

For citing references, writing bibliographies, and formatting the assignment, APA
format should be followed.
 ASSIGNMENT NO. 2

This assignment is a research-oriented activity. You are required to select any

trading/ manufacturing/ non-trading organization of your interest which supports
you in preparing a report of about 1000 words on the topic allotted to you, to be
submitted to your teacher for evaluation.
Select one of the following topics according to the last digit of your roll number.
For example, if your roll number is P-3427180 then you will select issue # 0 (the
last digit): -

TOPICS:

0 Role of SECP in corporate governance

1. Financial reporting and its implications in capital markets
2. The disclosure requirements of IAS-17 & IAS 36
3. The violations of IFRS in the corporate sector of Pakistan
4. The impact of IFRS on reducing frauds in the corporate sector
5. Do IFRS require huge costs for their implementation?
6. The ICAP and standards setting process in Pakistan
7. Why IFRS are required in a globalized world?
8. The role of IFRS and auditor report
9. The hurdles in the adoption of IFRS in Pakistan

The report should follow the following format:

1. Title page
2. Acknowledgements
3. An abstract (one page summary of the paper)
4. Table of contents
5. Introduction to the issue (brief history & significance of issue assigned)
6. Practical study of the organization (with respect to the issue)
7. Data collection methods
8. SWOT analysis (strengths, weaknesses, opportunities & threats) relevant
to the issue assigned
9. Conclusion (one page brief covering important aspects of your report)
10. Recommendations (specific recommendations relevant to issue assigned)
11. References (as per APA format)
12. Annexes (if any)
GUIDELINES FOR ASSIGNMENT # 2:
 1.5 line spacing
 Use headers and subheads throughout all sections
 Organization of ideas
 Writing skills (spelling, grammar, punctuation)
 Professionalism (readability and general appearance)
 Do more than repeat the text
 Express a point of view and defend it.
WORKSHOPS
The workshop presentations provide students opportunity to express their
communication skills, knowledge & understanding of concepts learned during
practical study assigned in assignment # 2.
You should use transparencies and any other material for effective presentation.
The transparencies are not the presentation, but only a tool; the presentation is the
combination of the transparencies and your speech. Workshop presentation
transparencies should only be in typed format.
The transparencies should follow the following format:
1) Title page
2) An abstract (one page summary of the paper)
3) Introduction to the issue (brief history & significance of issue assigned)
4) Practical study of the organization (with respect to the issue)
5) Data collection methods
6) SWOT analysis (strengths, weaknesses, opportunities & threats) relevant
to the issue assigned
7) Conclusion (one page brief covering important aspects of your report)
8) Recommendations (specific recommendations relevant to issue assigned)
GUIDELINES FOR PRESENTATION:
 Make eye contact and react to the audience. Don't read from the
transparencies or from report, and don't look too much at the
transparencies (occasional glances are acceptable to help in recalling the
topic to cover).
 A 15-minute presentation can be practiced several times in advance, so do
that until you are confident enough. Some people also use a mirror when
rehearsing as a substitute for an audience.
WEIGHTAGE OF THEORY & PRACTICAL ASPECTS IN ASSIGNMENT
# 2 & WORKSHOP PRESENTATIONS
Assignment # 2 & workshop presentations are evaluated on the basis of theory &
its applicability. The weightage of each aspect would be:
Theory: 60%
Applicability (practical study of the organization): 40%
 Financial Reporting II (8568)

UNIT 1 Leases (IAS) 17

1.2 Financial Lease and Operating Lease
1.3 Classification of lease
1.4 Substance over from
1.5 Accounting for finance lease
1.6 Accounting for operating lease
1.7 Sale and lease back transactions
1.8 Disclosures requirements

UNIT 2 Related Party Disclosures (IAS) 24

2.1 Related party in accounting transactions

2.2 The need for related party disclosures
2.3 Format of related party disclosures
2.4 Exemptions under IAS 24
2.5 Disclosure requirements

UNIT 3 Impairment of Assets (IAS) 36

3.1 Impairment of individual assets

3.2 Impairment
3.3 Measurement of recoverable amount
3.4 Indicators of repairmen
3.5 Recognition and measurement of impairment
3.6 Cash generating unit
3.7 Disclosures requirements

UNIT 4 Provisions, Contingent Liabilities and Contingent Assets (IAS) 37

4.1 Understanding provisions

4.2 Measuring provisions
4.3 Changes in provisions
4.4 Use of provision
4.5 Application of recognition and measurement rules
4.6 Contingent liabilities and contingent assets
4.7 Disclosures requirements

UNIT 5 Intangible Non-Current Assets (IAS) 38

5.1 Intangible assets

5.2 Identification and acquisition
5.3 Research and development
5.4 Cost of internally generated intangible asset
 5.5 Recognition as an expense
5.6 Measurement of intangible asset
5.7 Useful life
5.8 Disclosures requirements

UNIT 6 Construction Contracts (IAS) 11

6.1. Construction contracts and IAS 11

6.2. Contract revenues and costs
6.3. Recognition of contract revenues and costs
6.4. Presentation in financial statements
6.5. Disclosures requirements

UNIT 7 Investment Properties (IAS) 40

7.1. Investment properties

7.2. Accounting of investment properties
7.3. Reporting of investments
7.4. Disclosures requirements

UNIT 8 Taxation (IAS) 12

8.1. Understanding taxes and their accounting role

8.2. Income taxes and companies
8.3. Deferred tax
8.4. IAS 12 and deferred tax
8.5. Disclosures requirements

UNIT 9 Government Grants & (IAS) 20

9.1 Nature of government grants

9.2 Accounting for government grants
9.3 Recognition of government grants and assistance
9.4 Disclosures requirements of government grants

Recommended Books (Latest Editions)

1. Financial Accounting published by ICMAP, Karachi.

2. IRFS/IAS s issued by IASB, London.
3. Gripping IFRS by ICAP, Karachi.
4. Insight into IFRS by Hafiz Mohaiydin Tahir , PAC, Lahore.